Description
Net worth is the total value of assets owned by a company less the total liabilities that it owes. This metric is used to know about a company's current financial health.
Example
Net worth is calculated as Assets - Liabilities. For example, if a company has a debt of $200,000 and the value of its assets is $150,000, its Net Worth will be 150,000-200,000 = -$50,000. A negative net worth indicates that the business has more liabilities than assets.
Why it matters
A company with a positive net worth generally has good financial health and can offer a positive impression to its shareholders and investors. Companies must track their net worth over time to get a comprehensive view of their financial health and have a better view of current or potential debt.